While the company$$s strategy sets forth an approach to offering superior value, a company$$s business model is management$$s blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit. In this exercise you will be asked to evaluate the business model for SiriusXM.

The two elements of a company$$s business model are $(1)$ its customer value proposition and $(2)$ its profit formula. The customer value proposition is established by the company$$s overall strategy and lays out the company$$s approach to satisfying buyer wants and needs at a price that customers will consider a good value. The greater the value provided and the lower the price, the more attractive the value proposition is to customers. The profit formula describes the company$$s approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition. The lower the costs given the customer value proposition, the greater the ability of the business model to be a moneymaker. The nitty$-$gritty issue surrounding a company$$s business model is whether it can execute its customer value proposition profitably. Just because company managers have crafted a strategy for competing and running the business does not automatically mean that the strategy will lead to profitability$$it may or may not.

Table $1.$ Limited financial results

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$2017201820192020(1$st $6$ mos$)$Subscription fees $($in millions$)$$$5\mathrm{.}30$$$5\mathrm{.}70$$$6\mathrm{.}20$$$3\mathrm{.}20$Advertising revenues$$1\mathrm{.}20$$$1\mathrm{.}30$$$1\mathrm{.}40$Equipment sales$$132$$$155$$$173$Adjusted EBITDA margins$29\mathrm{.}4\%29\mathrm{.}0\%30\mathrm{.}60\%$

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The goal of this assignment is for you to understand what is meant by a company$$s strategy and why it needs to differ from that of competitors.

Before completing this exercise, be sure to review Chapter $1,$What Is Strategy and Why Is It Important?$,$ specifically, the section entitled $$A Company$$s Strategy and Its Business Model,$$ Illustration Capsule $1\mathrm{.}2,$ and the SiriusXM website $($investor$.$siriusxm.com$).$

Sources: Apple $10-$K$,$ Company website

Does SiriusXM$$s cost structure allow for acceptable profit margins?

Multiple Choice

SiriusXM$$s cost structure allows for an acceptable profit margin.

SiriusXM needs to lower its subscription fees to get more customers.

SiriusXM$$s cost structure does not allow for an acceptable profit margin.

It is difficult to determine whether SiriusXM$$s cost structure allows for an acceptable profit margin.

SiriusXM needs to raise its subscription fees to earn more profits.